Jason Kelly

The markets fell on Friday from a number of factors. The first and probably most important was simply that they were due for a breather after three weeks of up, up, up. They needed few excuses to give back some of the recent gains. Second, those excuses arrived.

The bad news came, as so much of life's bad news does, in a group of three. Goldman Sachs downgraded the semiconductor equipment sector. Then Alan Greenspan, speaking at a euro conference in Frankfurt, said that the U.S. government's current-account deficit would eventually convince foreigners to stop investing in American assets. He also said that the dollar will probably continue its downward spiral and that interest rates must rise. On that last point, he noted "anyone who has not appropriately hedged this position by now obviously is desirous of losing money." Finally, oil prices rose again.

The Dow fell 1% and the Nasdaq fell 1.6%. My investments fell further, with Maxtor down 1.5%, UTStarcom down 3.4%, and ProFunds Ultra Semiconductor down 4.4%. The mainstream news, true to form, adopted a shrill tone in reporting the declines.

I'm not worried. Even after the declines, Maxtor, UTStarcom, and Ultra Semi are up a respective 20%, 5%, and 11% from my buy prices.

Also, earlier in the week, we saw a glimpse of what lies ahead when Maxtor surged to $4.27 on Wednesday. From Monday to Friday, the stock traced a pyramid shape from Monday's opening at $3.77 to Wednesday's high at $4.27 to Friday's close at $3.90. Rather than focusing on the two-day 9% slide from $4.27 to $3.90, I suggest that you focus on the week's 3.5% gain from $3.77 to $3.90 and color the calendar green.

The pullback will serve us well in calming the bears a little. They've been saying it's due for the past two weeks. We might get a couple more days of it before resuming the winter rally, but resume we will.

Posted by Jason Kelly at 1:49 AM Japan time
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